‘(1) Where a landlord requires payment of a deposit in relation to any premises occupied as a dwelling under a tenancy, the occupier must pay that deposit into the Deposit Scheme unless subsection (2) applies.
(2) Landlords, or their appointed agents, who are members of national self-regulated bodies that are bonded by insurance schemes approved by the appropriate national authority may request in writing the payment of any deposit lawfully demanded directly to themselves.
(3) Where subsection (2) applies, the occupier must pay the deposit directly to their landlord, upon which the landlord must provide a written receipt.
(4) Any dispute between the landlord and the occupier over the return of the deposit is to be resolved by independent adjudication.
(5) The appropriate national authority may by regulations specify -
(a) The terms, conditions and management of the Deposit Scheme;
(b) Approved bodies and schemes under subsection (2);
(c) The mechanisms and procedures to be followed under subsection (4).
(6) The appropriate national authority may by regulations specify that a failure to adhere to such sections of this Part as it sees fit constitutes acts or omissions for the purposes of section 211 (2) of the Enterprise Act 2002.’.
Contacts:
Introduction
The policy context for the Housing Bill is the recognition by Government that the private rented sector could play a greater role in meeting housing need. A precondition for this must be to raise the standards both of the private rented housing stock and of its management, and to end the practices of those rogue landlords who give the sector a bad name. The Housing Bill therefore includes a number of welcome measures aimed at achieving a more professional private rented sector.
However the CAB Service regrets that the Bill does not include measures to safeguard the large sums of money which tenants hand over in deposits, nor to deal with the disputes which arise at the end of the tenancy over whether the deposit should be returned. Government figures indicate that some £790 million of tenancy deposit money is held by private landlords and agents, and 1 in 5 private tenants consider that their landlord retained too much of the deposit from their last tenancy.
Citizens Advice believes that measures to tackle this problem should be a priority for inclusion in this Bill and therefore strongly support this amendment.
Recent developments
- New MORI figures commissioned from Citizens Advice confirm that tenants have little confidence in current arrangements for the return of tenancy deposits. Six out of seven tenants who had had all or part of their deposit withheld, considered that that this was not justified. The MORI figures also confirm the Government’s figures that, overall, 1 in 5 tenants charged a deposit felt that too much had been withheld.
- During the Committee stage of the Bill, the Housing Minister put on record that the Government supported the principle of a statutory tenancy deposit scheme. He has also asked the Law Commission to draw up some indicative clauses on protecting tenancy deposits, which would be compatible with the direction of their wider work on tenancy reform. He also undertook to publish the long awaited Government response to the consultation on tenancy deposit reform, in May or June 2004, along with “carefully thought out legislative proposals”. However he did not undertake to introduce measures in the current Housing Bill.
- There is now an increased urgency to get tenancy deposit reform measures in place. The Pre-Budget Statement indicated that action should be taken to deal with problem areas such as the misappropriation of tenancy deposits, alongside fiscal reforms to make the industry more attractive to investors. The recent Budget statement envisages new Property Investment Funds arrangements being available from next year.
- There is growing acceptance by the industry that a statutory scheme is needed. In December 2003 ODPM and the Law Commission held a seminar for interested parties including representatives of landlords, agents, and tenants organisations, on the shape of possible reform. At this event there was a general acceptance of the ODPM’s proposal of a default custodial deposit scheme, financed from the interest on the money held, along with the option for professional and trade bodies to develop alternative schemes, subject to Government approval, providing equivalent or better protection.
- There is widespread public support for such a reform. A statutory Tenancy Deposit Scheme is supported by:
- 194 MPs who signed EDM 843
- The ODPM Select Committee
- Citizens Advice
- Shelter
- Association of Residential Lettings Agents
- Consumers Association
- National Consumer Council
- Local Government Association
- National Union of Students
Key arguments
- A statutory tenancy deposit scheme would end a much-criticised source of regular exploitation by landlords, replacing it with a fast and fair system in which both landlords and tenants can have confidence. As such it would do much to enhance the image of the private rented sector as one of professionalism and transparency, in which tenants are confident to rent and lenders are confident to invest.
- The timing of the Housing Bill is crucial in that it makes it possible to build on the momentum achieved by the Government-funded pilot scheme which is currently winding down, and to provide a framework for future industry–led initiatives. In the vacuum left by the ending of the pilot scheme, parts of the industry are already developing alternative models. Indeed ARLA has already luanched such a scheme. The inclusion of measures in this Bill would enable the industry to develop schemes which they could be confident were compliant with the legislation.
- Given that the Minister has now committed the Government to this reform and instructed indicative clauses to be drawn up, it is difficult to understand the logic for not amending this Housing Bill to include such measures. The Minister has argued that there is too much work to be done to enable legislation to be included in this Bill. However to take this opportunity would not be to legislate in haste: there has already been a three year ODPM funded pilot scheme, and a full consultation exercise which ended in February 2003. There is also a wealth of information available from the TDS pilot scheme and from existing legislation already working well in other countries such as Australia, which can be used to inform the detailed development of a scheme. On the other hand if this opportunity is missed, it could be several years before an alternative legislative vehicle gains parliamentary time.
Recent CAB evidence
Over the last decade, disputes over the non-return of rental deposits have consistently been amongst the most common issues of concern reported by CABx about the private rented sector. Common problems include:
- disputes over cleaning costs, or over whether any deterioration is more than reasonable wear and tear,
- cases where the deposit is withheld at the end of the tenancy without any reason being given, or where cheques are issued and then stopped,
- cases where the landlord simply says he hasn’t got the money available or where agents cease trading and disappear.
The following are recent examples of problems reported by CABx:
A CAB in Surrey reported a client who had £1,100 retained by her landlord. The client had not reported a small leak under the kitchen sink, as it had not caused any damage. The landlord claimed that she should have reported it, and refused to refund the deposit as a result.
A CAB in Sussex reported as case where a landlady was keeping a deposit of £1050. The clients agreed that there was some damage to the property, but not that it would cost this much money to repair. The landlady reportedly said that she could retain all of the deposit, even though it will not all be needed to cover the cost of damages. There was no proper inventory or contract at the beginning of the tenancy.
A client of a south London CAB had £700 of a £900 deposit withheld for cleaning and the painting of a radiator – the client disputes the necessity of this. When the client queried this with the landlord and letting agency, each claimed that the other was responsible for returning the deposit, and were refusing the speak to the client again by the time he took the problem to the bureau. The bureau is helping him take the case to the small claims court.
A single parent who visited a CAB in Merseyside was told by her landlord that he would not return her £430 deposit as she could not produce the receipt.
A south London CAB reported that their client’s landlady was refusing to return his deposit because he had allowed his girlfriend to stay overnight two nights a week. She claimed this was a fundamental breach of the tenancy agreement and that she was therefore entitled to keep the £300 deposit he had paid.
A CAB in Cheshire reported the case of a tenant whose faulty cooker burst into flames. The fire extinguisher failed to work so the tenant resorted to putting out the fire with his dressing gown. The fire resulted in damage to the cooker and some smoke damage. The landlord has indicated that he will withhold the deposit to cover the damage.
Sometimes the landlord withholds the entire deposit even when only part is under dispute:
A CAB in Hampshire reported a case where the landlord was seeking to withhold £150 from a deposit of £2,175 because of some damage to the garden. The landlord was refusing to return any of the deposit until agreement had been reached.
A client of another Hampshire CAB, a young disabled woman caring for her son, had a deposit of £500 withheld by her landlord. The client’s rent was covered by housing benefit, but had not been paid for the last week of the tenancy as the tenant had moved out a few days before the tenancy officially ended. The rent amounted to only £130, yet the landlord refused to pay any of the deposit back.
In other cases, the landlord makes no attempt to justify withholding the deposit:
A CAB in Kent reported a client who had been waiting two months for the return of his £700 deposit. There was no response to his telephone calls, and a registered letter was not accepted and returned to the client.
A CAB in Surrey reported a client who paid a deposit of £380 for a room. When she left, she asked for her deposit back but the landlord simply said that she had not got the money to enable her to repay it.
A CAB in West London reported a case where the agents were withholding the deposit of £3,000 without giving any reason.
E ven taking court action can be ineffective:
A CAB in Dorset reported a student who took court action for the non-return of £120 deposit. The client got a judgment in her favour for the sum plus interest and court costs, but the agent simply refused to pay.
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